Starting a Profitable Bakery Business

A bakery business is a very profitable venture if operated efficiently. It is not enough to be able to make good bread or cakes. A bakery business is an enterprise that requires resources and planning. The quality of your output is important. However, you also have to create an environment within which customers can access your products at great prices. At the highest level, the bakery business is capable of producing incredible profits and prestige.

Above all you should develop a passion for the enterprise given the hard work that is required of you. The great thing about this model is the possibility of transitioning from other corporate endeavors straight into bakery. Moreover, you can do it as a side business without hindering your other profession. The range of possibilities includes a family-owned and run home business. You can also become a major corporate entity that caters for major events. This article explains how to start a profitable bakery business.

Select and focus on a specific products

There are so many different types of bakery businesses that you may want to explore. Your decisions are determined by four primary considerations:

The amount of capital that you have

Your skills and competencies

The business aims, goals and objectives

The tastes and preferences of your customers

Each of these factors can change throughout the planning and implementation process for the bakery business. Therefore, you need to constantly adjust your bakery business and product selection accordingly. You have a number of options and niches that might just suit your client base. For example, you could make your bakery an exclusively online establishment in terms of identifying customers and taking their orders. This will save you money in terms of developing a storefront. At the same time, you may be inundated with calls for services beyond your capacity. In any case the use of internet for marketing such a personalized product may not give you the right opportunities to engage with your clients. The alternative is to have a counter service bakery which will call for dedicated commercial premises.

The bakery industry is increasingly coming up with new configurations to cater for novelty niches. A case in point is the sit down baker where clients can dine on the cakes within a restaurant/café style context. The eatery will need to be designed in such a way as to appeal to the client base. It should also meet all the health/safety standards prescribed by the municipal authority.

Bakery products

Make sure you have a comprehensive bakery business plan

The failure to plan is the beginning of business failure. The bakery business plan must be clear and succinct enough to give your potential partners, clients and investors an overview of what your objectives are. At the same time, it must be detailed enough to explain the nuances of the business that you propose. At the very minimum you need to have the following included:

The mission, vision and operational strategy

Market Analysis And Customer Segmentation

A business case showing that the business is financial viable and sustainable

A marketing and customer care plan

An organizational chart and human resource policy

A three-year expansion outlook

A risk and rewards Analysis

You will need to make an informed decision about the business type that you will adopt for your bakery business. Each of the different business entities requires very specific application processes for permits and registrations. The business type you select will determine who owns, runs and supervises the operations of the company. It’s also better to have a website for your bakery business.

List your tools and materials before budgeting

The bakery will require both fixed and variable expenditure. The fixed items will delve a lot into your initial capital outlay. This is because you will typically purchase big ticket items such as ovens, chillers and utensils. The variable expenditure relates to the actual ingredients for the cakes that you are selling. Most entrepreneurs in this niche use a make-to-order system to keep their cash flow gaps small. Remember that making perishable cakes and bread without a deposit can lead to significant losses if there is a surplus on the day. Bread in particular is best sold when fresh. Your pricing should reflect your costs and the profit margins that you want to achieve.

Typically, the fixed capital injection will start at about $20,000 for a small bakery business. You will then budget for each product line. This can be done on a daily or weekly basis depending on the consumption patterns that you observe. When recording costs; be sure to include the time that is spent on marketing, cleaning up, packaging and promotion. Sometimes entrepreneurs get into financial problems because they take these costs for granted.

Ultimately you are looking for a fair price that keeps you in business. Do not be tempted to compromise on quality as a means of correcting errors in your budgeting process. Those entrepreneurs that are running local family businesses should be careful about giving discounts to loved ones. This is because they could end up destroying the bakery business before it gets a chance to establish itself. The best solution is to have a friends and family discounts policy that takes into account all your costs.

Opportunities for diversification

Some bakeries start off with a single idea and then branch out depending on the responses that they get from customers. Others have integrated bakeries that do everything from in-house consumption to mail order. The product lines can vary considerably. For example; you could include cakes, sweets, bread and pastries. If the market demands it, you may also add complementary products such as a coffee shop or ice cream parlor. This is the true meaning of imaginative service delivery. You will be designing an experience rather than merely selling a single product. There are also specialty niches such as healthy bread and gluten-free products which you can explore. However, these specialty niches require intensive marketing that goes beyond the standard routines.

Bakery

Partnerships and collaborations for the bakery business

The bakery business is never a stand alone undertaking. It is possible to engage in vertical and horizontal partnerships. The vertical partnerships are more likely to be with people who are on the same level as you but only differ in terms of products. For example, you can do cakes while your neighbor does bread. The vertical partnerships allow you to be part of a production chain. For example, a restaurant can hire you to do all their pastry work. You will also work with transporters, advertisers and other food delivery units.

Of recent, bakeries are teaming up with supermarkets in order to expand their client base. The downside is that the volume and pace required by a supermarket may detract from the personalized quality service that the loyal customers are used to. The critical consideration is the ability to balance your ambitions with the possibilities that are available in the market at the time.

Future prospects for the bakery industry

The bakery has never really gone out of fashion. The Center for Economic Vitality reports that the bakery business industry is worth at least $33 billion in the USA. It consists of many small, medium-sized and large corporations. Commercial bakeries account for over 90% of the profits that are generated by the industry. Retail chain stores are left with just 10%. This is an industry that offers great prospects for the budding entrepreneur.

We wish you the best in your bakery business! Check out our collection of business plans , and more business ideas. Like us on Facebook, follow us on Twitter, and subscribe to receive notifications of new posts in your email.